How Tesla Could Become the Next Facebook

Wall Street Bulls envision the end of the internal combustion engine

Mark Zuckerberg has announced that his social media behemoth, Facebook, is adding a dating component, one that would compete with match.com and whatever else the kids are using to hook up these days, and now there’s even talk of the Silicon Valley tech company launching its own Bitcoin-style cryto-currency. Facebook is beginning to sound more and more like the ultimate Ponzi scheme. Zuckerberg announced the dating service at Facebook’s developers’ conference; just a couple of weeks after Zuckerberg struggled to name his company’s competitors in a Senate hearing.

Google and Facebook are virtually monopolies in their market segments, while Amazon continues to push its brick-and-mortar competitors out of business. Tesla, the electric vehicle manufacturer, is nowhere near such monopoly status, though it certainly dominates the world EV market, which means that it someday will become the world’s largest automaker. At least, that’s the thinking behind Tesla’s $50-billion market cap, which has long been greater than Ford Motor Company’s, and on some days tops General Motors’.

Wall Street’s Tesla bulls think that sooner, rather than later, the world will have to shift to electric-powered vehicles in order to save the planet. That’s not entirely misguided, considering the ever-mounting evidence of Climate Change. So let’s stipulate that someday the mass market will make a wholesale shift to pure-electric power (and that the power grids juicing up these cars and trucks will be fueled by something other than coal). If that somehow happens overnight, the old-line, mass-market automakers, from General Motors, Toyota Motor Company, Nissan-Renault, and Volkswagen Group to Ford Motor Company, and the smaller specialty companies like Jaguar Land Rover, Aston Martin, and Geely’s Volvo (not to mention Geely) would be caught with hundreds of thousands of unsalable cars and trucks.

That’s only possible if this mythic overnight shift to EVs happens suddenly in the next couple of years. By the early ‘20s, GM will have another 20 or so EV models for sale, while Ford adds an upscale Chevrolet Bolt competitor alongside plug-in hybrid pickups and Mustangs, and VW markets a trio, at least, of electric vehicles designed to help us forget Dieselgate while Porsche attacks the Tesla Model S, and Jaguar goes after the Tesla Model X, the latter a pretty easy and big target. Toyota, Hyundai, and Kia, and a new partnership between GM and Honda have a small fleet of hydrogen fuel-cell vehicles in the works, and in search of a viable infrastructure. Chinese automakers are already on the march toward mass-electrification, thanks largely to the number-one auto market’s planned economy.

It shouldn’t take a Wall Street analyst to figure out that an automaker spending part of its hefty profits from pickup trucks and SUVs to develop battery electric vehicles with range and recharge times that will attract mainstream buyers has a much better future than a small upstart automaker with enviable advanced technology, but no way to pay for its development other than by raising more capital.

Too many Wall Street analysts haven’t figured this out. The EV revolution is just a few quarters away, perpetually, and so what if Tesla needs another cash infusion—even if CEO Elon Musk says it doesn’t—to get there? When electra-geddon comes, the thinking goes, the electric-only automaker will be king, the automotive counterpart to Microsoft, Google, Apple, Amazon, Facebook: A righteous, morally justified monopoly.

Wall Street analysts have figured out recently that Tesla will need a cash infusion some time in the third or fourth quarter of this year. The automaker is burning through its dwindling cash reserves much like GM was in the last couple of years leading up to the Lehman Brothers collapse in September 2008. Musk says Tesla will start to reverse that cash burn and start to make money when Model 3 production ramps up toward its 5,000-per-week interim goal, and if you believe that, you believe that a high-tech $35,000 BEV [more like $50,000-55,000 with options] can make money for a small automaker.

Can it make money? I don’t know anymore. I’m conservative enough to listen to reverse-engineer Sandy Munro when he warns we should wait for his Tesla Model 3 teardown results. Munro & Associates’ analysis of the Model 3’s costs won’t be complete until July or so. After that, we’ll be waiting for Tesla’s Q3 earnings report, which should come in November. Then, its Q4 report next March—Musk predicts his automaker will be showing a profit by then. Most of all, we’ll be waiting for the capital infusion Musk says he doesn’t need in order to keep Tesla viable.

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